Carlo Cottarelli faces tricky task as Italy's new PM

May 29, 2018

Carlo Cottarelli faces tricky task as Italy's new PM

James Politi in Rome

May 28, 2018

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Less than two weeks after Italy’s March general election, Carlo Cottarelli was asked whether he might be asked to lead a government of national unity to break the political stalemate. The former IMF official laughed heartily.

“It’s more likely that they pick me to be the striker at Inter,” he told the TV presenter, referring to the Milanese football club.

On Monday, though, Mr Cottarelli was no longer joking as he accepted a mandate from President Sergio Mattarella to form a technocratic government to run the eurozone’s third-largest economy and steer it to new elections. “I am very honoured, I will try my best,” he said.

Mr Cottarelli has an especially tricky task ahead in the coming weeks. Political tensions are rising, with the leaders of Italy’s two surging populist parties attacking Mr Mattarella for the collapse of their attempt to form a government.

Investors have started to sell Italian debt and equity amid fears that the country’s position in the eurozone could be compromised. Mr Cottarelli himself will have very limited decision-making capacity, since his government is expected to lose a vote of confidence in parliament, and will merely take power to manage everyday business.

“This will be profoundly anomalous: a government that’s not a government with no particular legitimacy,” says Marco Tarchi, a political-science professor at the University of Florence. “If Cottarelli moves just one inch outside ordinary administration, he will be attacked,” he adds.

Mr Cottarelli, who was born in Cremona, near Milan, in 1954, embodies Italy’s internationally-minded economic leadership, which put him at the top of Mr Mattarella’s list to be stopgap prime minister.

After an early career at the Bank of Italy and Eni, the oil and gas company, he rose through the ranks of the IMF, becoming head of the fiscal affairs department between 2008 and 2013, at the height of the financial crisis.

Mr Cottarelli then returned to the heart of Italian politics as a spending tsar under Enrico Letta, the centre-left prime minister, where he began developing a list of budget cuts that could help reduce the country’s burgeoning debt.

Matteo Renzi, Mr Letta’s successor, kept Mr Cottarelli on briefly when he took over as prime minister in 2014, but tensions flared between the two, as Mr Renzi resisted implementing any of his suggestions. Mr Cottarelli ultimately stepped down.

Last year, Mr Cottarelli launched a centre for the study of Italy’s public finances at Milan’s Catholic university, analysing the economic platforms of the country’s political parties from a budgetary point of view, which propelled him back into the political spotlight. Since he had criticised all sides for their lack of fiscal rectitude, he became a natural compromise candidate for prime minister in Mr Mattarella’s eyes.

The new prime minister’s diplomatic skills will be tested almost immediately when he represents Italy at both the G7 summit in Canada and the European Council in Brussels — both scheduled for June.

But Mr Cottarelli seems very aware that his biggest challenge will come if the market sell-off of recent weeks accelerates further.

After accepting the mandate from Mr Mattarella, he sought to reassure jittery investors. “The Italian economy is still growing and public finances are under control,” he said. “Our role in the EU is essential, as is our participation in the eurozone,” he added.